Advance Beneficial Order v. Penn. Safe Deposit & Trust Co.
| Decision Date | 07 May 1900 |
| Docket Number | 5 |
| Citation | 46 A. 102,195 Pa. 602 |
| Parties | Advance Beneficial Order v. Penn. Safe Deposit and Trust Company and Josiah R. Adams |
| Court | Pennsylvania Supreme Court |
Argued March 21, 1900
Appeal, No. 5, Jan. T., 1900, by Mary L. Schieffelin Executrix of Edward Schieffelin, deceased, from order of C.P No. 1, Phila. Co., June T., 1891, No. 873, dismissing exceptions to auditor's report, in case of Advance Beneficial Order v. Penn Safe Deposit & Trust Company and Josiah R. Adams. Affirmed.
Exceptions to auditor's report.
The auditor, Charles N. Mann, Esq., reported as follows:
There were two corporations, both known by the name of the Penn Safe Deposit and Trust Company, and both affiliated with the Spring Garden National Bank. The first was incorporated under the name of the Penn Safe Deposit, Trust and Insurance Company by a special act of assembly, approved April 3, 1872 appendix to P.L. 1873, page 1067, and will hereafter be designated as the old trust company, to contradistinguish it from the trust company whose funds are before the court for distribution, and which will hereinafter be designated as the new trust company.
Prior to May, 1889, the old trust company's name was changed to that of the Penn Safe Deposit and Trust Company. Its capital was $100,000, and in May, 1889, all its stock was owned by the Spring Garden National Bank. It had at one time owned part of the real estate upon which the bank building was erected and had constructed at a cost of less than $40,000 eight safe deposit vaults therein. By virtue of sundry resolutions of the board of directors, the value of these vaults was increased to $100,000, and in May, 1889, were carried at that value on its books. This trust company conveyed its real estate together with the vaults, to the National bank in fee, but entered into an agreement with the National bank providing for the use of the vaults by the trust company, except so much thereof as the National bank should require for its own use, which was one of the eight vaults. With this state of facts in existence, Lewis E. Pfeiffer, on behalf of himself and his associates, entered into negotiations with the officials of the Spring Garden National bank to purchase the charter of this trust company, and offered $10,000 for it, which was accepted, whereupon the following agreement was executed:
In pursuance of this agreement, Mr. Pfeiffer paid to the Spring Garden National Bank the $10,000, and the National bank transferred to him and his associates all the stock of the trust company.
By decree of the court of common pleas, No. 3, for the county of Philadelphia, No. 763, of June term, 1889, made September 16, 1889, the name of the old trust company was changed to that of the "Philadelphia Finance Company."
It will be observed that the agreement between Mr. Kennedy and Mr. Pfeiffer of May 21, 1889, among other things, provided that "no assets of the corporation shall be transferred to the party of the second part, but only the full number of the shares of stock, so as to vest in the party of the second part all the franchises of the said corporation." Under this reservation the assets of the old trust company were conveyed to Robert C. Thomas in trust The above conveyance is dated May 21, 1889.
It was originally intended that the new corporation provided for under the foregoing trust should be capitalized at $100,000, and the stock subscribed for by the Spring Garden National Bank. Mr. Kennedy was advised, however, that to obtain the benefit of the provisions of the Act of May 9, 1889, P.L. 159, the capital of the new trust company would have to be not less than $125,000, as is required in that act.
To make up this capital the right to use the vaults was assumed to be worth $100,000, although the certificates filed in connection with the incorporation of the new trust company are silent on the subject. No one was willing to subscribe for the remaining $25,000 of capital stock, whereupon the following scheme was devised to raise the same. A promissory note for $25,000, to the order of the Spring Garden National Bank, payable on demand, was signed by the directors of the National bank as individuals, and then sitting in their capacity as directors, they ordered that the amount of the note should be passed to the credit of the new trust company on the books of the National bank. This was done, and thereupon the five corporators named in the conveyance to Robert C. Thomas in trust as aforesaid, signed the certificate for the incorporation of the new trust company, and three of them acknowledged it and swore to the truth of the contents thereof. Among other things, it sets forth that the capital was $125,000, divided into 1250 shares, of the par value of $100, and $12,500, being ten per centum of the capital stock, had been paid in cash to the treasurer; that each of the five corporators had subscribed for 250 shares, and they were chosen directors for the first year. This certificate was dated September 27, 1889, and acknowledged and sworn to the same day.
The five corporators named in the certificate of incorporation were clerks in the bank, and were mere figureheads having no interest in the intended corporation, and in executing the certificate acted for the National bank.
The certificate was advertised and presented to the governor of the state, who, on November 8, 1889, issued letters patent thereon. The new trust company was organized November 16, 1889, and certificates for the 1250 shares of stock issued, 1090 shares to the Spring Garden National Bank, and twenty shares each to the eight directors of the trust company. The 160 shares issued to the directors were issued as stock to qualify them to act as such directors. It did not belong to them, but was owned by the National bank, and, with the certificate for the ninety shares issued to the National bank, was transferred in blank. The trust company then drew a check for $25,000 against the credit for that amount in the National bank, which arose from the promissory note aforesaid. This note was then indorsed by the National bank "without recourse," and with the 160 shares of directors' qualification stock and the ninety share certificate issued to the National bank, in all 250 shares, transferred in blank as aforesaid, deposited in the treasury of the new trust company, where it was found by the accountant.
The assets of the new trust company at the time of its organization, in November, 1889, nominally aggregated $142,767.84, of which $100,000 was the assumed value of the right to use the vaults, $25,000 was the directors' promissory note, and the balance made up of Sun Fire Insurance Company and sundry items carried as cash. The liabilities, including capital of $125,000, necessarily equaled the assets, the balance being made up of a profit and loss account of $1,935.55.
On April 1, 1890, Robert C. Thomas, in execution of the trust provided for in the conveyance to him of May 21, 1889, exhibit B, as aforesaid, conveyed to the new trust company "all and singular the assets, all the safes, vaults, bonds, mortgages, and securities of every kind herein assigned to me to and for the only proper use and behoof of the said The Penn Safe Deposit and Trust Company so incorporated as aforesaid on November 8, 1889, its successors and assigns forever, to be held and enjoyed by the said company precisely as the assignor to me by the within paper held them."
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